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Tencent (TCEHY) to Report Q4 Earnings: What's in the Cards?

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Tencent Holdings (TCEHY - Free Report) is set to report fourth-quarter 2020 results on Mar 24.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in one, the average surprise being 5.21%.

The Zacks Consensus Estimate for fourth-quarter earnings has remained steady at 50 cents over the past 30 days. The figure suggests growth of 31.5% from the figure reported in the year-ago quarter.

Further, the consensus mark for revenues currently stands at $19.5 billion, indicating growth of 29.9% from the figure reported in the year-ago quarter.

Let’s see how things have shaped up for this announcement.

Tencent Holding Ltd. Price and EPS Surprise

Tencent Holding Ltd. Price and EPS Surprise

Tencent Holding Ltd. price-eps-surprise | Tencent Holding Ltd. Quote

Key Factors to Watch

Tencent’s fourth-quarter 2020 results are expected to reflect strength in its rich gaming portfolio as well as strong distribution capability, especially as users followed social distancing guidelines due to the coronavirus outbreak.

Additionally, strong video game spending in the quarter bodes well for Tencent. Per Venturebeat, which cited NPD data, U.S. video game sales in October, November and December increased 14%, 35% and 25%, respectively.

The company is expected to have benefited from its dominance as one of the biggest game distributors in China, which is the world’s largest video game market, in terms of users and revenues.

Moreover, iflix’s vast active user base of 25 million across 13 countries including Malaysia, Indonesia, Bangladesh and Thailand and a vast library of curated and original content are expected to have boosted WeTV’s userbase in the to-be-reported quarter.

Tencent’s international user base is expected to have expanded in the quarter under review, courtesy of Honor of Kings and Peacekeeper Elite. Coronavirus-induced social distancing norms are expected to have aided active user growth in the fourth quarter.

Additionally, Supercell’s Brawl Stars, and Activision Blizzard’s (ATVI - Free Report) Call of Duty Mobile and League of Legends are expected to have contributed to the company’s international revenues in the to-be-reported quarter.

Markedly, Call of Duty: Mobile has become the fourth highest revenue generating game in China, trailing Tencent’s Honor of Kings and PUBG Mobile as well as Fantasy Westward Journey from NetEase (NTES - Free Report) .

Moreover, the launch of Take-Two Interactive Software’s (TTWO - Free Report) Kerbal Space Program on Tencent's WeGame platform in China is a key catalyst.

Also, growth in digital content revenues, owing to video streaming subscriptions and live broadcast services including HUYA’s live streaming service, is expected to have aided social network revenues, especially as millions of people practiced social distancing.

Further, momentum in cloud services is expected to have continued, owing to fast penetration into key sectors, including finance. This is expected to have driven FinTech and Business Services revenues in the to-be-reported quarter.

Online advertising revenues are expected to have benefited from wider adoption of its algorithmic advertisement buying solutions and improving advertiser spending.

Markedly, by category, this Zacks Rank #3 (Hold) company witnessed rapid growth in advertising spending from sectors such as education, Internet services and e-commerce and recovered demand from sectors such as real estate and automobiles in the third quarter. This trend is expected to have continued in the to-be reported quarter as well.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, media advertising revenues from platforms, including Tencent News, are expected to have taken a hit due to weak demand for brand ad and delayed content production in the quarter under review.

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